AUD/USD – Steady As Aussie Leading Index Jumps

The Australian dollar continues to drift this week, as AUD/USD trades in the low-0.90 range on Wednesday. In economic news, the Australian CB Leading Index surprised the markets, posting its sharpest gain in over three years. The Wage Price Index rose in January and matched the forecast. Later in the US day, the US releases Building Permits and the Producer Price Index, both key events. As well, we’ll get a look at the minutes of the most recent Federal Reserve meeting.

There was positive news from Australia on Wednesday, as CB Leading Index, posted a strong gain of 0.8% in January, jumping from 0.2% a month earlier. This was the index’s best performance since August 2010. Earlier in the week, the RBA released the minutes of the its most recent meeting, and the listless response from the Aussie summarized the reserved market reaction to the release. The RBA noted that record-low interest rate levels and a weaker Australian dollar had bolstered growth, and the Bank predicted that interest rates, which currently stand at 2.50%, would remain at their current levels for the near future. The RBA did note its concern about weak employment conditions, which are weighing on the economy. Last week, Employment Change posted a second straight decline and was well below market expectations. As well, the Unemployment Rate rose to 6.0%, its highest level in over 10 years. These dismal employment numbers are weighing on the Australian dollar.

Recent US numbers have not impressed the markets. Retail Sales weakened in January, and the hiccups continue on the employment front, as Unemployment Claims were higher than expected last week. On Tuesday, the culprit was the Empire State Manufacturing Index. The important manufacturing indicator slid to 4.5 points in January, down sharply from 12.5 a month earlier. The estimate stood at 9.9 points. If the markets don’t see some improvement soon, the dollar could lose ground to its major rivals.

The Federal Reserve will release the minutes of its last policy meeting later on Wednesday, and traders should pay close attention to this event, which has been a market-mover in the past. At its last meeting, the Fed trimmed QE by another $10 billion, reducing the bond-buying scheme to $65 billion each month. Fed chair Janet Yellen has said that QE could be winded up by the end of 2014, provided that the economy behaves and there are no sudden downturns, particularly on the employment front.

 

AUD/USD for Wednesday, February 19, 2014

Forex Rate Graph 21/1/13

AUD/USD February 19 at 13:35 GMT

AUD/USD 0.9031 H: 0.9044 L: 0.8991

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.8735 0.8893 0.9000 0.9119 0.9229 0.9361

 

  • AUD/USD is showing little movement in Wednesday trading. The pair touched a low of 0.8991 early in the Asian session but then rebounded back above the 0.90 level.
  • 0.90, a key line, continues to provide support. It remains a weak line and could face pressure during the day. This is followed by stronger support at 0.8893.
  • 0.9119 is the next line of resistance. Next, there is resistance at 0.9229.
  • Current range: 0.9000 to 0.9119

 

Further levels in both directions:

  • Below: 0.9000, 0.8893, 0.8735, 0.8658 and 0.8516
  • Above: 0.9119, 0.9229, 0.9361 and 0.9466

 

OANDA’s Open Positions Ratio

AUD/USD ratio has reversed directions on Wednesday, pointing to gains in short positions. This is not consistent with what we are seeing from the pair, as the Australian dollar has made very slight gains. AUD/USD ratio continues to have a majority of long positions, reflecting a trader bias towards the Aussie moving higher against the US currency.

AUD/USD remains above the 0.90 line in Wednesday trading. We could see some movement from the pair in the North American session, as the US releases Building Permits, PPI and the Federal Reserve minutes.

 

AUD/USD Fundamentals

  • 00:30 Australian Wage Price Index. Estimate 0.7%, Actual 0.7%.
  • 13:30 US Building Permits. Estimate 0.98M.
  • 13:30 US PPI. Estimate 0.2%.
  • 13:30 US Core PPI. Estimate 0.2%.
  • 13:30 US Housing Starts. Estimate 0.95M.
  • 19:00 US FOMC Minutes.

*Key releases are highlighted in bold

*All release times are GMT

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.